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Offshoring starts to lose its glamour

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Spiraling costs, including high wage inflation, in offshore IT centres – including India – is prompting UK bosses to cut down on outsourcing, bringing offshored IT work back home.

This is according to Karen Geldenhuys, MD of ICT-focused recruitment company, Abacus Recruitment, who says there has been concern about rising outsourcing costs during the past two years, most notably in current world leader India.
"UK bosses are already under pressure by an economy that is heading towards a recession, and where inflation is currently double the target of the Bank of England. Faced by rising offshoring costs, they are starting to pull back on offshoring work."
In a recent poll, published in UK-based online publication, www.contractorUK, 75% of IT directors in the UK said that they had no plans to send more IT work offshore during 2009 to locations like India, where the economy is pumping away and growing at about 9% a year.
"There has been concern for some time now that wage demands were getting too high in India, and that the economy was at risk of over-heating. But the problem of high wages is not only related to India," says Geldenhuys.
While 75% of IT directors said they would not opt for offshoring next year, almost one-fifth said they would increase their IT offshoring during 2009; 6% said they would repatriate offshored IT work back to the UK.
"Serious alarm bells are not yet going off; but this trend is starting to sound a small signal," says Geldenhuys. "One of the advantages of offshoring is the reduction in costs it brings. If this cannot be achieved, there is very little reason to send work – including development and manufacturing – offshore."